Investing Ideas Evergrande nerves weigh on offshore yuan, dollar edges up...

Evergrande nerves weigh on offshore yuan, dollar edges up on safety bid


ForexSep 20, 2021 03:10PM ET

(C) Reuters. FILE PHOTO: A U.S. dollar banknote is seen in this illustration taken May 26, 2020. REUTERS/Dado Ruvic/Illustration/File Photo

(Updates prices, adds Wells Fargo (NYSE:WFC) forecast)

By Chuck Mikolajczak

NEW YORK (Reuters) – The offshore Chinese yuan weakened versus the greenback to its lowest level in nearly a month on Monday, as worries about the repercussions from property developer Evergrande’s solvency issues spooked financial markets and lifted safe-haven currencies.

Market sentiment has been rattled by the potential contagion from Evergrande, which is trying to raise funds to pay a host of lenders, suppliers and investors. A deadline for an $83.5 million interest payment on one of its bonds is due on Thursday, and the company has $305 billion in liabilities.

On Thursday, the yuan strengthened to its highest level in three months at 6.4226 per dollar before starting to reverse as Evergrande’s woes worsened. The move sharpened on Monday after warnings from Chinese regulators that the company’s insolvency could fuel broader risks in the country’s financial system if not stabilized.

Analysts at Wells Fargo said on Monday they expect the dollar to reach 6.60 per yuan within the next month. The offshore Chinese yuan last weakened versus the greenback at 6.4839 per dollar.

“We are seeing a classic flight to safety in the dollar until we get some sense of clarity on whether or not it is going to be an orderly or disorderly resolution to Evergrande,” said Joe Manimbo, senior market analyst at Western Union (NYSE:WU) Business Solutions in Washington DC.

“We were likely to see a continuation of the decline we’ve seen in risk assets going into this week and you throw in Evergrande and it has really unsettled the markets.”

The dollar and other safe-haven currencies such as the yen and Swiss franc gained with the risk-off sentiment, which saw Wall Street’s S&P 500 index on pace for its biggest one-day percentage drop 11 months.

The dollar index rose 0.025%, with the euro unchanged at $1.1725.

The dollar has also been gaining ground on expectations the Federal Reserve will begin reducing its monthly bond purchases this year, with the central bank’s policy announcement due on Wednesday.

Aside from the Fed, multiple central banks around the globe will hold policy meetings this week, including those of Sweden, England, and Norway.

The Japanese yen strengthened 0.58% versus the greenback at 109.32 per dollar, while sterling was last trading at $1.3656, down 0.63% on the day.

The Canadian dollar, also a commodity currency that correlates with risk sentiment, weakened to as low as C$1.2895 per dollar, its lowest level in four weeks. It last fell 0.42% versus the greenback at C$1.28 per dollar.

Polling for Monday’s national election in Canada points to an advantage for incumbent Prime Minister Justin Trudeau, but he is unlikely to gain a parliamentary majority.

In cryptocurrencies, bitcoin last fell 7.76% to $43,577.67.


Currency bid prices at 2:52PM (1852 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change


Dollar index

93.2330 93.2230 +0.03% 3.614% +93.4550 +93.1850


$1.1727 $1.1726 +0.01% -4.02% +$1.1737 +$1.1700


109.3350 109.9800 -0.58% +5.82% +110.0350 +109.3250


128.20 128.94 -0.57% +1.01% +129.0300 +128.1500


0.9276 0.9325 -0.51% +4.85% +0.9333 +0.9271


$1.3655 $1.3727 -0.52% -0.05% +$1.3740 +$1.3640


1.2820 1.2768 +0.42% +0.68% +1.2895 +1.2762


$0.7243 $0.7263 -0.28% -5.84% +$0.7268 +$0.7221


1.0878 1.0927 -0.45% +0.66% +1.0935 +1.0876


0.8587 0.8535 +0.61% -3.92% +0.8594 +0.8533


Dollar/Dollar $0.7022 $0.7035 -0.26% -2.28% +$0.7042 +$0.7006


8.7395 8.7120 +0.28% +1.74% +8.7805 +8.7105


10.2500 10.2008 +0.48% -2.07% +10.2815 +10.1995


8.6963 8.6787 +0.18% +6.10% +8.7459 +8.6644


10.1986 10.1804 +0.18% +1.21% +10.2336 +10.1755

Evergrande nerves weigh on offshore yuan, dollar edges up on safety bid

Latest news

ASEAN excludes Myanmar junta leader from summit in rare move

World27 minutes ago (Oct 16, 2021 07:50AM ET) 2/2 (C) Reuters. FILE PHOTO: Flags are seen outside the Association of Southeast...

Biden to attend memorial service honoring U.S. law enforcement officers

World8 minutes ago (Oct 16, 2021 07:10AM ET) (C) Reuters. FILE PHOTO: U.S. President Joe Biden and first lady Dr....

Russia seeing record gas demand but still ready to boost EU supplies, Novak says

Commodities23 minutes ago (Oct 16, 2021 06:56AM ET) (C) Reuters. FILE PHOTO: Flames from a gas burner are reflected on...

Attackers Behind Trickbot Expanding Malware Distribution Channels

The operators behind the pernicious TrickBot malware have resurfaced with new tricks that aim to increase its foothold by...

Subscribe here

UK PM Johnson visits church where lawmaker was stabbed to death

World15 minutes ago (Oct 16, 2021 06:03AM ET) 5/5 (C) Reuters. Britain's Labour Party leader Keir Starmer, Prime Minister Boris Johnson...

NASA launches first space probe to study Jupiter’s Trojan asteroids

Stock Markets17 minutes ago (Oct 16, 2021 06:01AM ET) 5/5 (C) Reuters. The capsule with NASA's Lucy spacecraft, atop a United...

You might also likeRELATED
Recommended to you